Generations of punters have discovered the hard method that their negligent greed is the tool the ‘Smart Cash’ usages to separate them from their money and capital.
The game is as old as the stock exchange: the Smart Cash acknowledges the top remains in, and in order to sell all their shares, they need to recruit bagholders to purchase their shares and hold them all the method down. When the catastrophic losses have actually been taken by the bagholders, then the Smart Cash slowly develops positions amidst the wreckage.
It’s easy to become a bagholder; all you need is greed. Existed, done that, for the siren tunes enticing bagholders to their ruin are engaging and many. The Smart Cash doesn’t need to misguide anybody; all they do is let the strident super-Bulls talk up the riches to be had by all those who purchase today and hold indefinitely, and human greed does the rest.
Siren tunes to entice the unwary greedy consist of these classics:
1. The Fed has our back, i.e. the Fed will never let stocks go down, so there’s no threat in purchasing more shares today.
2. Development stocks can only go higher as they develop brand-new markets that are the future of the economy.
3. Institutional buyers are coming in, and that implies prices can just go higher.
4. This is a brand-new age, old measures of evaluation no longer matter.
5. Over time, stocks only go higher, so buy and hold is the winning strategy.
The best ally of the Smart Money is buy the dip, as the bagholders trained to purchase the dip will continue purchasing every dip en route down up until their capital is expended. Bagholders see every rally off a dip as proof buy the dip works, when every rally off a dip has actually been engineered to absorb bagholders.
Every rally is another chance to sell for the Smart Money.
The greatest obstacle to the Smart Money selling is low volume. The main point of selling is to dribble out shares in such modest dosages that the rate doesn’t move. If a huge block of shares is dumped at one time, then the rate collapses in low-volume markets. So the Smart Money sells slowly and systematically, moving 100 million shares in time to a million bagholders who each buy 100 shares.
When questioned, the Smart Cash prevaricates with generalities rather than reveal their hands. The marketplace is “useful” and “supportive of equities,” etc., useless terms planned to mask their stable selling and lull the bagholders into an incorrect confidence in the Fed, innovation leaders, purchase the dip, this time it’s various, and so on
. The Smart Cash can rely on one thing: greed is sticky. Once a bagholder has actually chosen that Innovation-XYZ is their one-way ticket to unearned wealth– simply look at all the freshly minted millionaires who not did anything however trade call choices in Innovation-XYZ– then the Smart Money understands the bagholder will never release that belief till there’s no more cash to toss into call options.
Generations of punters have discovered the tough method that their unwary greed is the tool the Smart Cash uses to separate them from their money and capital. The techniques described in Reminiscences of a Stock Operator might have changed over time, however the game of selling at the top while extending the top to allow huge selling without moving markets is quite alive and well.
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